For me, credit card interest rate is a non-issue. I use my card as a convenience and for the cash-back feature. I never use it as a means of living on borrowed money.
The paradox of credit cards…
Why you can’t win when you pay interest on a credit card…
As long as there’s a balance on your credit card, you are in debt. The lender requires you to pay interest for the use of that money. Credit card companies are happiest when you pay the bare minimum, because that extends the time you are making payments. The longer the time you are paying, the more interest they get from you. The table below illustrates the effect of time using two different credit card balances. In each case, we see that the higher the monthly payment, the shorter the time to repay the loan. Continue reading →
The consumer culture has become a complicated and complex place to live. Dealing with money is no longer simple and straightforward, and it’s easy to make financial mistakes that haunt us for years. Despite the focus on finances during Financial Literacy Month in Canada, insights to help us navigate through the system are fragmented and inconsistent.
For many years I taught a college course in consumer issues and economics. Early on, I discovered that most students thought if they made the minimum monthly payment on their credit card, they weren’t in debt. They used their credit cards freely and paid the required minimum each month. They thought they were doing the smart and adult thing. Sadly, they weren’t. Continue reading →
This week I’m sending out an extra post in case you aren’t on social media and haven’t seen this. I’d love to have you participate in my 1-question survey.
November is financial literacy month in Canada. I just read something that got my attention. Now I’m curious—and am doing a one-question survey. I’d love to know what you think. Go to bit.ly/2zu7pyR to record your answer.
Here’s the scenario: Chris has returned from a fabulous 27th birthday vacation. The entire trip was paid for with a credit card intended for that purpose only. The vacation cost $4268 and the card will never be used to buy anything else. Chris has vowed to make the minimum payment each month, without fail. The first payment is $43 and the annual interest rate is 20%. How old do you think Chris will be when the last payment is made? 35, 40 or 49 years old?
You’ll be entered in a draw for an autographed copy of my book Conscious Spending, Conscious Life. And if you’d like to share this blog-post with people you know, that would be awesome!